Aurora Cannabis Announces Fiscal 2024 Third Quarter Results; Generates Record Adjusted EBITDA of $4.3 Million
- Aurora Cannabis Inc. has achieved its fifth consecutive quarter of positive adjusted EBITDA.
- The company has become the largest global medical cannabis company in nationally legal markets following the acquisition of MedReleaf Australia.
- Aurora reported a cash position of over $200 million and expects to fully repay remaining convertible debt of $7.3 million in February.
- 41% YoY growth in international medical net revenue demonstrates Aurora's ability to meet diverse patient needs in markets across the world.
- The acquisition of MedReleaf Australia is expected to be immediately accretive to Adjusted EBITDA, while accelerating their path to generate positive free cash flow this calendar year.
- Consumer cannabis net revenue decreased from $14.6 million to $11.6 million in the prior year quarter.
- The decrease in net revenue of $6.2 million in the consumer cannabis segment was primarily due to the decision to allocate product to higher margin markets.
- Aurora's net loss from continuing operations for the three months ended December 31, 2023, was $25.2 million compared to a net loss of $62.4 million for the same period in the prior year.
Insights
The acquisition of MedReleaf Australia by Aurora Cannabis Inc. is a strategic move that positions the company as the largest global medical cannabis company in nationally legal markets. This acquisition is expected to contribute positively to Aurora's Adjusted EBITDA, which is a significant measure of profitability, especially since it has been positive for five consecutive quarters. The focus on international medical net revenue, which grew by 41% year-over-year, indicates a strong and expanding global footprint, which is crucial for sustained growth in the burgeoning medical cannabis industry.
Moreover, Aurora's emphasis on achieving positive free cash flow within the calendar year is an important indicator for investors, as it suggests a move towards financial sustainability and reduced reliance on external financing. The company's debt reduction strategy, culminating in the repayment of remaining convertible debt, further strengthens its balance sheet, making it an attractive prospect for investors concerned with financial stability.
The company's reported cash position of over $200 million provides it with a solid liquidity buffer, which is essential for navigating the volatile cannabis market and funding ongoing operations without the immediate need for additional financing. Overall, Aurora's strategic acquisition, focus on high-margin international markets and improved financial health are likely to be viewed positively by investors, potentially impacting its stock valuation.
Aurora Cannabis Inc.'s reported increase in consolidated net revenue and adjusted gross profit signifies a competitive advantage in the medical cannabis sector. The company's strategy to allocate products to higher margin markets, resulting in a decrease in consumer cannabis net revenue but an increase in overall profitability, demonstrates a focused approach to optimizing market segments for financial gain.
The growth in the international medical cannabis market, particularly in Australia and Europe, is a testament to Aurora's successful product launches and market penetration strategies. The company's ability to maintain a strong adjusted gross margin before fair value adjustments in the medical cannabis segment, despite the closure of its Nordic production facility, showcases operational efficiency and effective cost management.
Investors should note the seasonality of the plant propagation business, which contributes to the company's diversified revenue streams. The expected seasonally higher revenues in the fourth quarter align with historical trends and could provide a stable source of income during that period. Aurora's operational results, including the average net selling price and kilograms sold, are critical metrics that reflect the company's pricing power and market demand for its products.
The cannabis industry is characterized by rapid growth and increasing acceptance worldwide and Aurora's expansion into international markets is indicative of tapping into this potential. The company's year-over-year growth in high-margin international net cannabis revenue suggests it is effectively leveraging global market opportunities. However, it is important to consider the broader economic context, including regulatory changes, market saturation and competition, which could influence Aurora's future performance.
The cannabis industry's economic impact extends beyond direct financial results, influencing sectors such as healthcare, agriculture and retail. Aurora's strategic positioning and financial results can be seen as a bellwether for the industry's direction. Its performance may influence investor sentiment and stock market dynamics within the cannabis sector, potentially affecting related ETFs and indices.
Long-term implications for stakeholders include the potential for increased market share and brand recognition, which could result in a stronger competitive position. However, risks such as regulatory hurdles, market volatility and shifts in consumer preferences remain. Aurora's focus on cost efficiencies and achieving positive free cash flow is a prudent approach in an industry where many players are still struggling to become profitable.
NASDAQ | TSX: ACB
- Re-Affirms Commitment to Achieving Positive Free Cash Flow1 This Calendar Year, Delivers Fifth Consecutive Quarter of Positive Adjusted EBITDA1
- Aurora Becomes the Largest Global Medical Cannabis Company in Nationally Legal Markets Following the Acquisition of MedReleaf Australia
- Strong YoY Growth of
41% in High Margin International Net Cannabis Revenue1 - Cash position of over
$200 Million $7.3 Million
In a separate press release issued today before the markets opened, Aurora also announced that a wholly owned subsidiary of the Company has acquired the remaining approximately
"Fiscal 2024 is on track to be our strongest to date, driven by the continued strength of our differentiated business model and our focus on profitable global medical cannabis markets. Our international medical net revenue1 grew
Mr. Martin added. "The acquisition of MedReleaf Australia will make Aurora the largest global medical cannabis company in nationally legal markets and will allow us to leverage our success in providing pharmaceutical grade cannabis across 15 countries. MedReleaf Australia is expected to be immediately accretive to Adjusted EBITDA1, while accelerating our path to generate positive free cash flow1 this calendar year."
Mr. Martin continued, "Q3 marks our fifth consecutive quarter of positive adjusted EBITDA1, driven by consistent performance in our Canadian business and substantial revenue growth internationally. We are now on the cusp of achieving positive adjusted EBITDA1 on an annualized basis for the first time in fiscal 2024, a critical milestone for us, supported by our previously announced goal of realizing
_____________________________________ |
1 This press release includes certain non-GAAP financial measures, which are intended to supplement, not substitute for, comparable GAAP financial measures. See "Non-GAAP Measures" below for reconciliations of non-GAAP financial measures to GAAP financial measures. |
2 The Pennington Institute, "Cannabis in |
Third Quarter 2024 Highlights
(Unless otherwise stated, comparisons are made between fiscal Q3 2024, Q2 2024, and Q2 2023 results and are in Canadian dollars)
Consolidated Revenue and Adjusted Gross Profit:
Total net revenue1 was
Consolidated adjusted gross margin before fair value adjustments1 was
Medical Cannabis:
Medical cannabis net revenue1 was
The increase in net revenue1 of
Adjusted gross margin before fair value adjustments1 on medical cannabis net revenue remained strong at
Consumer Cannabis:
Aurora's consumer cannabis net revenue1 was
Adjusted gross margin before fair value adjustments1 on consumer cannabis net revenue1 was
Plant Propagation:
Plant propagation net revenue1 was wholly comprised from the Bevo business, contributing
Adjusted gross margin before fair value adjustments1 on plant propagation revenue was
Selling, General and Administrative ("SG&A"):
Adjusted SG&A1 was
Adjusted R&D1, was
Net Loss:
Net loss from continuing operations for the three months ended December 31, 2023 was
Adjusted EBITDA:
Adjusted EBITDA1 was
Fiscal Q4 2024 Expectations:
- In fiscal Q4 2024, the Company expects revenue from Canadian medical and consumer segments to be steady quarter over quarter, while
Europe andAustralia should provide modest growth in their regions. - For plant propagation, we expect to see seasonally higher revenues and gross profit that should be in-line with historical performance in the comparable prior year period.
- Revenue increases combined with ongoing cost control are expected to result in continued positive Adjusted EBITDA1 in Q4 2024.
Aurora's achievement of significant and sustainable operating cost and SG&A reductions has now resulted in five consecutive quarters with positive adjusted EBITDA1. Continuing growth in positive adjusted EBITDA1 paves the path towards positive free cashflow in calendar year 2024.
During the three months ended December 31, 2023, the Company repurchased approximately
Key Quarterly Financial and Operating Results
($ thousands, except Operational Results) | Three months ended | ||||||
December | December | $ Change | $ Change | September | $ Change | % | |
Financial Results | |||||||
Net revenue (1)(2a) | 5 % | 2 % | |||||
Medical cannabis net revenue (1)(2a) | 16 % | 3 % | |||||
Consumer cannabis net revenue (1)(2a) | ( | (21 %) | ( | (3 %) | |||
Plant propagation net revenue (1)(2a) | 10 % | 2 % | |||||
Adjusted gross margin before FV adjustments on total net | 50 % | 46 % | N/A | 4 % | 51 % | N/A | (1 %) |
Adjusted gross margin before FV adjustments on core | 55 % | 51 % | N/A | 4 % | 55 % | N/A | 0 % |
Adjusted gross margin before FV adjustments on medical | 62 % | 63 % | N/A | (1 %) | 63 % | N/A | (1 %) |
Adjusted gross margin before FV adjustments on | 26 % | 20 % | N/A | 6 % | 27 % | N/A | (1 %) |
Adjusted gross margin before FV adjustments on plant | 18 % | 15 % | N/A | 3 % | 22 % | N/A | (4 %) |
Adjusted SG&A expense(2d)(5) | 12 % | ( | (1 %) | ||||
Adjusted R&D expense(2d) | ( | (12 %) | ( | (17 %) | |||
Adjusted EBITDA (2c)(5) | (46 %) | 28 % | |||||
Balance Sheet | |||||||
Working capital (2e,f,6) | ( | (27 %) | 27 % | ||||
Cannabis inventory and biological assets (3) | 20 % | ( | (2) % | ||||
Total assets | ( | (20 %) | ( | 0 % | |||
Operational Results – Cannabis | |||||||
Average net selling price of dried cannabis excluding bulk | 1 % | 0 % | |||||
Kilograms sold (4) | 14,440 | 15,269 | (829) | (5 %) | 13,582 | 858 | 6 % |
(1) | Includes the impact of actual and expected product returns and price adjustments (Q3 2024 – nil; Q2 2024 – nil; Q3 2023 – |
(2) | These terms are defined in the "Cautionary Statement Regarding Certain Non-GAAP Performance Measures" section of this MD&A. Refer to the following sections for reconciliation of Non-GAAP Measures to the IFRS equivalent measure: |
a. Refer to the "Revenue" and "Cost of Sales and Gross Margin" section for a reconciliation of cannabis net revenue to the IFRS equivalent. | |
(3) | Represents total biological assets and inventory, exclusive of merchandise, accessories, supplies, consumables and plant propagation biological assets. |
(4) | The kilograms sold, net of returns during the period. |
(5) | Prior period comparatives were adjusted to include the adjustments for markets under development, business transformation costs, and non-recurring charges related to non-core bulk cannabis wholesales to be comparable to the current period presentation. |
(6) | Comparative information has been re-presented due to discontinued operations. |
(7) | Working capital for the three months ended September 30, 2023 has been adjusted. Refer to discussion under "Liquidity and Capital Resources" section of this MD&A. |
Conference Call
Aurora will host a conference call today, Thursday, February 8, 2024, to discuss these results. Miguel Martin, Chief Executive Officer, and Glen Ibbott, Chief Financial Officer, will host the call starting at 8:00 a.m. Eastern time | 6:00 a.m. Mountain Time. A question and answer session will follow management's presentation.
Conference Call Details
DATE: | Thursday, February 8, 2024 |
TIME: | 8:00 a.m. Eastern Time | 6:00 a.m. Mountain Time |
WEBCAST: |
This weblink has also been posted to the Company's "Investor Info" link at https://www.auroramj.com/investors/ under "Events".
About Aurora
Aurora is opening the world to cannabis, serving both the medical and consumer markets. Headquartered in
Aurora's common shares trade on the NASDAQ and TSX under the symbol "ACB" and is a constituent of the S&P/TSX Composite Index.
Forward Looking Statements
Forward-looking statements made in this news release include, but are not limited to, statements regarding pro forma measures including revenue, cash flow, Adjusted gross margin before fair value adjustments, and expected SG&A run-rates; ongoing cost efficiencies, the Company's path and timing to achieve positive free cash flow, and expectations for the achievement of positive adjusted EBITDA on an annualized basis in fiscal 2024; the Company's continued focus on profitable global medical cannabis markets; the acquisition of MedReleaf Australia and associated benefits to the Company, including, but not limited to, the expected positive impact on EBITDA and the generation of positive free cash flow in calendar 2024, the Company's leadership in the global medical cannabis market, and the creation of future opportunities; statements under the heading "Fiscal 2024 Expectations" including, but not limited to, those with respect to expectations for cannabis and plant propagation revenues, the impact of the acquisition of MedReleaf Australia on revenue in future quarters, expectations related to gross profit in the plant propagation segment, and expectations for an increase in Adjusted EBITDA in Q4 as compared to Q3; plans to repay the remaining balance of convertible debt at maturity; and timing for a conference call to discuss the Q3 fiscal 2024 results. These forward-looking statements are only predictions. Forward looking information or statements contained in this news release have been developed based on assumptions management considers to be reasonable. Material factors or assumptions involved in developing forward-looking statements include, without limitation, publicly available information from governmental sources as well as from market research and industry analysis and on assumptions based on data and knowledge of this industry which the Company believes to be reasonable. Forward-looking statements are subject to a variety of risks, uncertainties and other factors that management believes to be relevant and reasonable in the circumstances could cause actual events, results, level of activity, performance, prospects, opportunities or achievements to differ materially from those projected in the forward-looking statements. These risks include, but are not limited to, the ability to retain key personnel, the ability to continue investing in infrastructure to support growth, the ability to obtain financing on acceptable terms, the continued quality of our products, customer experience and retention, the development of third party government and non-government consumer sales channels, management's estimates of consumer demand in
Non-GAAP Measures
This news release contains reference to certain financial performance measures that are not recognized or defined under IFRS (termed "Non-GAAP Measures"). As a result, this data may not be comparable to data presented by other licensed producers of cannabis and cannabis companies. Non-GAAP Measures should be considered together with other data prepared in accordance with IFRS to enable investors to evaluate the Company's operating results, underlying performance and prospects in a manner similar to Aurora's management. Accordingly, these non-GAAP Measures are intended to provide additional information and to assist management and investors in assessing financial performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The information included under the heading "Cautionary Statement Regarding Certain Non-GAAP Performance Measures" in the Company's management's discussion and analysis for the three months ended September 30, 2023, and 2022 (the "MD&A") is incorporated by reference into this news release. The MD&A is available on the Company's issuer profile on SEDAR at www.sedarplus.com.
Net Revenue, Adjusted Gross Profit and Margin
Net revenue, adjusted gross profit before FV adjustments, and adjusted gross margin before FV adjustments are Non-GAAP Measures and can be reconciled with revenue, gross profit and gross margin, the most directly comparable GAAP financial measures, respectively, as follows:
($ thousands) | Medical | Consumer | Core | Total Core | Non-Core Bulk | Plant | Total |
Three months ended December 31, 2023 | |||||||
Gross revenue | 47,942 | 16,951 | 106 | 64,999 | 323 | 7,285 | 72,607 |
Excise taxes | (2,860) | (5,328) | — | (8,188) | — | — | (8,188) |
Net revenue (1) | 45,082 | 11,623 | 106 | 56,811 | 323 | 7,285 | 64,419 |
Non-recurring net revenue adjustments (4) | — | — | — | — | — | — | — |
Adjusted net revenue | 45,082 | 11,624 | 106 | 56,812 | 323 | 7,284 | 64,419 |
Cost of sales | (23,965) | (12,657) | (133) | (36,755) | (449) | (7,321) | (44,525) |
Depreciation | 2,665 | 1,340 | 14 | 4,019 | 48 | 1,052 | 5,119 |
Inventory impairment and non-recurring | 4,201 | 2,719 | 28 | 6,948 | 95 | 319 | 7,362 |
Adjusted gross profit (loss) before FV | 27,983 | 3,025 | 15 | 31,023 | 17 | 1,335 | 32,375 |
Adjusted gross margin before FV | 62 % | 26 % | 14 % | 55 % | 5 % | 18 % | 50 % |
Three months ended September 30, | |||||||
Gross revenue | 46,736 | 16,103 | 60 | 62,899 | 429 | 7,154 | 70,482 |
Excise taxes | (2,920) | (4,144) | — | (7,064) | — | — | (7,064) |
Net revenue(1) | 43,816 | 11,959 | 60 | 55,835 | 429 | 7,154 | 63,418 |
Non-recurring revenue adjustments (4,5) | — | — | — | — | — | (518) | (518) |
Adjusted net revenue | 43,816 | 11,959 | 60 | 55,835 | 429 | 6,636 | 62,900 |
Cost of sales | (23,781) | (13,292) | (81) | (37,154) | (638) | (6,900) | (44,692) |
Depreciation | 2,726 | 1,441 | 8 | 4,175 | 69 | 896 | 5,140 |
Inventory impairment, non-recurring, out-of- | 4,632 | 3,143 | 19 | 7,794 | 151 | 804 | 8,749 |
Adjusted gross profit (loss) before FV | 27,393 | 3,251 | 6 | 30,650 | 11 | 1,436 | 32,097 |
Adjusted gross margin before FV | 63 % | 27 % | 10 % | 55 % | 3 % | 22 % | 51 % |
Three months ended December 31, | |||||||
Gross revenue | 41,750 | 19,819 | 664 | 62,233 | 224 | 6,631 | 69,088 |
Excise taxes | (2,826) | (5,173) | — | (7,999) | — | — | (7,999) |
Net revenue(1) | 38,924 | 14,646 | 664 | 54,234 | 224 | 6,631 | 61,089 |
Cost of sales | (24,197) | (22,673) | (1,013) | (47,883) | (1,417) | (8,080) | (57,380) |
Depreciation | 2,055 | 1,560 | 68 | 3,683 | 95 | 843 | 4,621 |
Inventory impairment, out-of-period, and | 7,639 | 9,370 | 436 | 17,445 | 655 | 1,578 | 19,678 |
Adjusted gross profit (loss) before FV | 24,421 | 2,903 | 155 | 27,479 | (443) | 972 | 28,008 |
Adjusted gross margin before FV | 63 % | 20 % | 23 % | 51 % | (198 %) | 15 % | 46 % |
(1) | These terms are Non-GAAP Measures and are note recognized, defined or standardized measures under IFRS. Refer to the "Cautionary Statement Regarding Certain Non-GAAP Performance Measures" section of this MD&A. |
(2) | Inventory impairment includes inventory write-downs due to lower of cost or net realizable value adjustments, obsolescence provision adjustments, and inventory destruction. |
(3) | Markets under development represents the adjustment for business operations focused on developing international markets prior to commercialization. |
(4) | Non-recurring items includes one-time excise tax refunds, inventory count adjustments resulting from facility shutdowns and inter-site transfers, and abnormal spikes to utilities costs on its plant propagation business. |
(5) | Non recurring items includes business transformation costs in connection with the re-purposing and ramp-up of the Company's Sky facility. . |
(6) | Out-of-period adjustments include adjustments to year-end bonus accruals included in the current quarter but relating to prior quarters and adjustments to input assumptions related to fair value of biological assets. |
(7) | Comparative information has been re-presented due to discontinued operations. |
Adjusted EBITDA
Adjusted EBITDA is a Non-GAAP Measure and can be reconciled with net income (loss), the most directly comparable GAAP financial measure, as follows:
($ thousands) | Three months ended | Nine months ended | |||
December 31, | September 30, | December 31, | December 31, | December 31, | |
Net income (loss) from continuing operations | (25,218) | 256 | (62,357) | (45,715) | (719,724) |
Income tax expense (recovery) | (67) | 128 | (98) | 157 | (13,438) |
Other income (expense) | 1,395 | (11,431) | (4,492) | (4,045) | 557,794 |
Share-based compensation | 2,839 | 4,568 | 4,281 | 9,688 | 10,616 |
Depreciation and amortization | 9,258 | 9,198 | 11,030 | 26,744 | 37,505 |
Acquisition costs | 1,567 | 563 | 2,998 | 2,356 | 8,632 |
Inventory and biological assets fair value and | 3,999 | (4,611) | 32,539 | (3,927) | 67,150 |
Business transformation related charges (1) | 5,469 | 6,801 | 11,893 | 18,834 | 27,761 |
Out-of-period adjustments (2) | — | 692 | 516 | 1,236 | 2,816 |
Non-recurring items (3) | 5,107 | (2,766) | 5,587 | 5,143 | 6,297 |
Markets under development (4) | — | — | 1,073 | — | 3,424 |
Adjusted EBITDA (5) | 4,349 | 3,398 | 2,970 | 10,471 | (11,167) |
(1) | Business transformation related charges includes costs related to closed facilities, certain IT project costs, costs associated with the repurposing of Sky, severance and retention costs in connection with the business transformation plan, costs associated with the retention of certain medical aggregators. |
(2) | Out-of-period adjustments reflect adjustments to net loss for the financial impact of transactions recorded in the current period that relate to prior periods. |
(3) | Non-recurring items includes one-time excise tax refunds, non-core adjusted wholesale bulk margins, inventory count adjustments resulting from facility shutdowns and inter-site transfers, litigation and non-recurring project costs. |
(4) | Markets under development represents the adjustment for business operations focused on developing international markets prior to commercialization. |
(5) | Adjusted EBITDA is a Non-GAAP Measure and is not a recognized, defined, or standardized measure under IFRS. Refer to "Cautionary Statement Regarding Certain Non-GAAP Performance Measures" section of the MD&A. Prior period comparatives were adjusted to include the adjustments for markets under development, business transformation costs, and non-recurring charges related to non-core bulk cannabis wholesales to be comparable to the current period presentation. |
(6) | Comparative information has been re-presented due to discontinued operations. |
Adjusted SG&A
Adjusted SG&A is a Non-GAAP Measure and can be reconciled with sales and marketing and general and administrative expenses, the most directly comparable GAAP financial measure, as follows:
Three months ended | Nine months ended | ||||
($ thousands) | December 31, | September 30, | December 31, | December 31, | December 31, |
Sales and marketing | 12,106 | 12,617 | 12,946 | 37,400 | 41,495 |
General and administration | 22,259 | 22,744 | 26,508 | 66,564 | 85,172 |
Business transformation costs | (5,150) | (6,515) | (11,249) | (15,728) | (26,842) |
Out-of-period adjustments | — | (692) | (516) | (1,236) | (3,332) |
Non-recurring costs | (1,670) | (412) | (2,179) | (2,675) | (4,533) |
Market development costs | — | — | (914) | — | (3,265) |
Adjusted SG&A (1) | 27,545 | 27,742 | 24,596 | 84,325 | 88,695 |
(1) | Adjusted SG&A is a Non-GAAP Measure and is not a recognized, defined, or standardized measure under IFRS. Refer to the "Cautionary Statement Regarding Certain Non-GAAP Performance Measures" section of this MD&A. |
Adjusted R&D
Adjusted R&D is a Non-GAAP Measure and can be reconciled with research and development expenses, the most directly comparable GAAP financial measure, as follows:
Three months ended | Nine months ended | ||||
($ thousands) | December 31, | September 30, | December 31, | December 31, | December 31, |
Research and development | 782 | 946 | 954 | 2,829 | 4,115 |
Business transformation costs | — | — | (70) | — | (256) |
Adjusted R&D (1) | 782 | 946 | 884 | 2,829 | 3,859 |
(1) | Adjusted R&D is a Non GAAP Measure and is not a recognized, defined, or standardized measure under IFRS. Refer to the "Cautionary Statement Regarding Certain Non-GAAP Performance Measures" section of this MD&A. |
Working Capital
Working capital is a Non-GAAP Measure and can be reconciled with total current assets and total current liabilities, the most directly comparable GAAP financial measure, as follows:
($ thousands) |
December 31, | Three months ended September 30, |
December 31, | |
Total current assets | 406,530 | 387,981 | 542,791 | |
Total current liabilities | (107,377) | (152,558) | (133,062) | |
Working capital(1) | 299,153 | 235,423 | 409,729 | |
(1) | Working capital for the three months ended September 30, 2023 has been adjusted. Refer to discussion under "Liquidity and Capital Resources" section of this MD&A. |
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SOURCE Aurora Cannabis Inc.
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